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An Indian farmer spreads maize husks to dry in April. Emerging markets will benefit most from the latest bull market because of their reliance on exporting raw materials such as oil, precious metals and agricultural goods.BIJU BORO/AFP / Getty Images

Emerging-market stocks and bonds have only started a rally that may last until 2018 as a new bull market takes hold in commodities, according to the best-performing exchange-traded fund focused on developing nations.

Invesco PowerShares Capital Management LLC studied data since 1973 to show that commodities typically go through a boom-and-bust cycle every seven years, with the greatest gains ensuing in the first two. The latest round may have started in January and emerging markets will benefit most because of their reliance on exporting raw materials such as oil, precious metals and agricultural goods, the Illinois-based asset manager said.

"The bulk of the potential cyclical returns appears to lie ahead," said Jason Bloom, director of commodities and alternatives research and strategy at Invesco, whose sovereign-debt fund gave the best volatility-adjusted returns in the past 12 months among U.S. ETFs with at least $1-billion (U.S.) in assets.

Developing-nation stocks leaped into a bull market in March and their bonds are handing investors some of the world's safest gains as a Bloomberg commodity gauge rebounded 14 per cent from record lows in the first month of 2016. The MSCI emerging markets index gave an average cumulative return of 63 per cent in the first two years of each of the past four commodity cycles, Invesco's calculations show.

History indicates the advances will continue until raw-material prices peak, according to Invesco, which bases its outlook both on the performance of commodities and the U.S. dollar's simultaneous drop from highs. A deepening of the negative correlation between the two asset classes has been a feature of past cycles, including one in the 1970s when the United States decided to let its currency freely float against other major exchange rates, Mr. Bloom said.

The degree of opposing moves in the greenback and commodities increased to the highest since August on Thursday, according to data compiled by Bloomberg.

Invesco favours buying in U.S. dollar-denominated bonds for the best combination of risk and returns, according to Thomas Boccellari, a fixed-income and alternatives product strategist at the fund house. The Bloomberg USD emerging market composite bond index has advanced 8.7 per cent cct. from a low on Jan. 20.

"U.S. dollar-denominated emerging-market debt would provide exposure to a rebound, while partaking in possible spread tightening, but helps to reduce currency volatility that can overwhelm fixed-income returns," Mr. Boccellari said. "For investors looking for more equity-like risk and return, we like ETFs with local-currency exposure."

Still, it won't be a smooth ride up given the fluctuations in commodity prices, according to Mr. Bloom.

"The seven-year commodity cycle has historically offered a two-year average window of opportunity," Mr. Bloom said. "We recommend averaging into a position to reduce the risks of entering or exiting the market."